The Stochastic Oscillator, developed by George Lane, measures where the current closing price sits within the recent high-low range. A reading near 100 means price is closing near the top of its recent range, indicating strong buying momentum; a reading near 0 means price is closing near the bottom. The indicator uses two lines: the %K (the fast, raw stochastic) and %D (a smoothed signal line). Crossovers between these lines in overbought (above 80) or oversold (below 20) zones are commonly used as entry signals. Like most oscillators, the Stochastic is most reliable in range-bound markets and can produce extended false signals in strong directional trends.
